Friday, April 29, 2005

Social Security Plans

The President's photo-op on all four Networks failed to cancel committed opposition to the Bush Social Security plan. The Opposition centers around the Benefits cuts entailed under the Bush plan. Almost All proposed Plans, and they number over a dozen, suffer from too much Gun. There are methods which create less jolt.

Liberal plans call for raising the 'Cap' on taxable Income. Setting this Cap at $150,000 would create a Tax of $9300 if the full increase was paid, an additional $3906 if the full increase was paid. $9300 per Year to build a annuity which will pay about twice the yearly amount of Payment from Retirement until Death does not seem an excessive price, especially when it includes a very favorable Medical insurance policy as part of the accessible benefits. Will it provide 100% solvency? Who knows, but it provides more revenue than the current Tax base.

Many Conservative plans call for Price-indexing of benefits, which will sharply curtail benefits over Time. The major problem with this avenue lies in dealing with Retirement benefits. Most of these Retirees lack exterior Income generation capacity. There is a real method to use Price-indexing without damage to Anyone: Use COLA increases yearly only on a Base benefit, with additional COLA for the rest of the benefits payable only once in every decade, without payment of backpay or degeneration in the interim period. Will this bring 100% solvency? Who knows precisely. The real Solution along these lines is to dictate a unitary benefit granted to All, no matter what level of Taxes have been paid in. This would assure Solvency!

The Unitary Benefit could even allow for some usage of Private Accounts, as long as taxation remained at a level to pay for 80% of the Unitary Benefit, and Private Accounts were required to pay the intervening taxation charged Others before Private Accounts funds were released to the Retiree. Private Accounts, though, are not a panacea. A probable half of all such Accounts would be unable even to pay the intervening taxation. No Lie!

The real problem is stopping the Government from spending the accrued Funds! The Author still proposes all FICA taxes should be turned over to the Fed, who would be charged with paying all SS liabilities, and loaning excess Funds to Banks at 4% Interest rate--said Banks allowed to count such funds as Reserves. lgl

Drug Abuse Cost

The Economic Costs of Drug Abuse in the United States 1992–2002
Office of National Drug Control Policy
Executive Summary

This Author has some difficulties with this form of reportage. It is technically accurate, but the methodology tends to be of self-serving design. It still provides some grasp of the Problem Cost. A primary defect arrives in non-provision of the actual Costs of Drug purchase in the consumption of the illicit Drugs. The provided Estimates have been maximized as official policy, so real Probability values remain low; but it is all We can get.

The economic cost of drug abuse in 2002 was estimated at $180.9 billion. This value represents both the use of resources to address health and crime consequences as well as the loss of potential productivity from disability, death and withdrawal from the legitimate workforce.

The Study estimates $128.6 billion of lost productivity in 2002. The Estimate is somewhat ridiculous as Drug-Users possess relatively little of the Puritan Work Ethic, and would have transferred to legal Abuse such as Alcohol. Reality states the real loss to be within 50-60% of the registered Estimate.

Over 11 percent of arrests in the US are for drug offenses. In addition, appreciable fractions of income generating crimes are attributed to drug abuse: on the order of a quarter of burglaries, personal larcenies and robberies. Many studies have found that in excess of half of all arrestees and prisoners charged or convicted for such offenses are users of illicit drugs

The Study attributes $107.8 billion of the Cost(60%) comes from the commission of crime. The loss of Prisoner productivity is over-inflated, for the reasons mentioned above. The criminal justice system were still be present without Drug crimes, as would the Police concentration on the streets; therefore, Other Costs could be cut in half as the Costs of law enforcement would still be present, though overstaffing and Prison and Jail facilities do add Cost because of Drug-related crime.

The Executive Summary should be read, though, because of the insight given(even if you cannot read the entire Report due to the Time constraint like this Author). lgl

Waiting for 2011

A Meatloaf Song held a refrain 'Now I am waiting for the End of Time'. Most of the World probably awaits the retirement of the Baby Boomers, though they are unlikely to realize it. This is not a rant against older Workers, as the Author is himself a Baby Boomer. It simply reflects the World desire for the Baby Boomers to slow down. The Author believes a List should be made for understanding:

Who collects the highest Wages and Benefits--Baby Boomers
Who spends the most for Health Care --Baby Boomers
Who buys the Gas-guzzlers --Baby Boomers
Who buys the expensive Real Estate --Baby Boomers
Who does 80% of the Investment Speculation --Baby Boomers
Who refuses to act their Age --Baby Boomers

The Author's own Generation will stop all the above-mentioned Antics with Retirement; at least, it is so hoped! They may just conclude it is time for another round of Plastic Surgery. The purchase of more Homes likely will end--it being not unusual for Baby Boomers to own 2,3, or 5 Residential addresses. They own the Family car for Church, the SUV to drive to Work, the RV for Camping, and the Pick-up to haul the trash(don't forget about the Boat and Trailer). They remain Warren Buffet Wannabees, so they search the Trade Papers, and dump spare Cash on quick, Overnight Flyers. They finish by 'Keeping up with the Jones' to wit: Marty down the street just got a Twenty grand raise, I have to demand Thirty grand tomorrow.

Economic heresy: The World Economy has to downsize; it requires too many Resources, too much Capitalization at too small a Return, and there will be a shrinking Labor Force in the future. The World simply has to throw Us Consumption Junkies out of the Office first. lgl

Thursday, April 28, 2005

The Slow Quarter

Growth Pace of Economy Slowed in 1st Quarter
By THE ASSOCIATED PRESS Published: April 28, 2005

Summation: The First Quarter had an estimated economic growth rate of 3.1% instead of 3.5% as predicted by Economists(this Author estimates this will be revised down to 2.7%, due to the heavy activity in Inventories and Oil stockpiling). The Inflation gauge tied to the Report said prices rose at a rate of 2.2% in the First Quarter--minus Food and Fuel(real Qualifier: Fuel cannot be excluded from the qauge if the higher Oil prices extend over two Quarters, and Food must be included if there is significant year on year advance overall). Consumer spending slowed at 0.7% Quarter on Quarter, suggesting actual decline in the face of the Inflation gauge--including Food and Fuel. Business investment was also down to only slightly better than one-third the pace of the previous Quarter.

Steep Weekly Rise in U.S. Oil Supply Cuts Price 4.8%
By JAD MOUAWAD Published: April 28, 2005

Crude oil imports reached 10.86 million barrels a day last week, the third-highest average on record, according to the Energy Department. And gasoline imports exceeded a million barrels a day for the third consecutive week.
The Second Quarter economic growth shows little likelihood of better numbers than has the First Quarter. Inventories are building, but so is Inflation. The Economy added only 110,000 New Jobs in March--very low, especially with new Unemployment Claims rising to 320,000. Fuel prices will adversely affect at least until well into the Third Quarter. The Trade deficit is eating up GDP at a 1.4% rate. It is time for 'Shock Therapy'. This Author will give his recommendation, then explain it.

Recommendation: Presidential Order limiting Gasoline importation to 800,000 barrels per day. All Gasoline importation requiring an Importation permit.

Such an Presidential Order would curb both Consumer use of Gasoline through higher Pump prices, and curb other Sector inflation better than a 1% rise in the Fed Interest rates. The Pump price should not exceed $3/gallon, and Consumption should decrease by greater amount than the current importation cut. There would be both pressure and funding to increase Refining capacity in this Country. It only sounds crazy! lgl

Wednesday, April 27, 2005

Durable Goods

Durable-Goods Orders Sank in March for 3rd Month in a Row
By JENNIFER BAYOT Published: April 27, 2005

To predict whether companies will need to spend on buildings or machinery in the next few months, economists often subtract military spending, another volatile sector, in addition to transportation spending. Using that measure, new orders fell 3 percent, deepening a 4.2 percent decline this year. Only orders for primary metals and communications equipment gained new orders, rising 1 percent and 5.1 percent respectively

A truly good article for a Newspaper! It mentions that Unfilled Orders dropped by 0.5%, which assures a lack of hiring in the Manufacturing sector even if it is not an absolute 'Dictat'. The 14.3% decline in Transportation basically reflects decline in Aircraft Sales, but this Author worries if there has also been a slide in Heavy Trucks (not mentioned). Such a reduction could mean fewer Consignment orders. The Forecasts predicting higher Oil pricing would affect the Economy less than in the 1970s were in error, it simply delayed the Timing of the impact.

Oil selling at less than $53 per barrel serves as no relief, and Gasoline stocks being drawn down 300,000 barrels did not help. The American Economy is in a Supply-driven Price inflation, and the increased Crude stocks will only mean higher Pump prices throughout the summer. Greenspan and the Fed had better impose another Interest hike, or We will have raging Inflation at the Retail level. No Fed reduction of Rates will help economic performance, as Business Interest savings cannot match the Fuel Cost increases. It also will not forestall any potential Slowdown, not with

Inventories stockpiled for the 16th consecutive month, up 0.4 percent, to $291 billion, suggesting that manufacturers would soon cut production. Stores of primary metals like steel posted the largest increase, 2.6 percent, to $23.5 billion. lgl

Tuesday, April 26, 2005

Consumers are Shaken
Chain Store Sales Fall
By REUTERS Published: April 26, 2005

Sales in April to-date were down 3.8 percent compared with March. Sales at major retailers rose by 1.5 percent on a year-over-year basis for the week ended April 23, said Redbook Research, an independent company.
Consumer Confidence Dips; New Home Sales Up
By THE ASSOCIATED PRESS Published: April 26, 2005

But a sub-index measuring consumers' expectations for the coming months fell to its lowest level since July 2003

The later article pointed to a highly volatile Housing market with New Home Sales shooting up. Economists accept this as a good Sign, but it could be a Two-Edged Sword. Consumers have been paying down their Credit Card debt, and the later article notes Consumers are less confident their Incomes will increase in the coming months. The Housing Sales this Year could present a Warning sign, Consumers all knowing Housing is immune from Bankruptcy condemnation. This is a weak Argument, except for the rapid Consumer consolidation into Mortgage debt. lgl

Monday, April 25, 2005

Tax Direction

International Tax Comparisons, 1965-2003 (federal, state & local)

The United States collect less taxes (federal, State, and local) as a percentage of GDP than any OECD Country except Mexico. The listed percentage of GDP for 2003 was 24.2% in the United States. We assess only 1.5% of GDP as Corporate income taxes, half that collected by the other OECD Countries. Personal Income taxes have declined in this Country by 17% since 1980. Americans pay significantly less in Social welfare taxation (6.9% v. OECD rate of 10.9%, 2002 readings), and get reduced Social benefits. Americans pay around half the consumption taxes imposed on Consumers of other OECD Countries (4.6% v. 9.5%, 2002 readings), with American Consumer spending generating American economic growth. Americans compare with OECD countries fairly equally in Property and Wealth taxes (3.2% v. 2.5% of GDP, 2002 readings).

What does the information tell Us?

We are collecting sufficient Tax revenue, don't let the Bush Budget-Busting fool Anyone. The United States still collect more Taxes in nominal terms than any other Country. The second salient Point states We are spending the Funds in the wrong place, and in the wrong manner. Corporations and Business are not contributing a equitable share of tax revenues. Standardization of Social welfare benefits are necessary to normalize welfare costs: Our medical practice is not the best in the World, as it is too expensive, and it is not universal care. Personal Income taxes generate insufficient tax revenues, mainly because of legislated tax evasion procedures. We have to dump the Deductions and Exemptions, if We want to rationalize the Tax Code. The final Point states that Inheritance taxation impacts economic performance marginally at most, and serves to forestall oligarchic Intergenerational Transfers of excess Wealth. lgl

Do Conservatives Govern Well?

Current Economic thought would suggest Conservatives are better at theory than Liberals, but can the same be said for their practice? George W. Bush, along with his Team, abandoned fiscal restraint for lower Taxes; Chaney claiming the Reagan Years proved Deficits don't matter. The Dollar erodes in crisis, Oil price continues to rise, and We have only a 'Rich get Richer' Recovery from the last slowdown. None of the above factors would likely exist, except for the Bush Tax Cuts. The Bush Team is also hypocritical, claiming their achieved Budget reductions utilizing a posit that all their Tax Cuts will be repealed, but knowing they will fight 'tooth and nail' to keep those Tax Cuts. They, meanwhile, continue to spend and spend!
Fiscal Growth in Latin Lands Fails to Fill Social Needs
By JUAN FORERO Published: April 25, 2005

Here We find the same Conservative incompetence in Government. Fiscal restraint stands as God below the Rio Grande. Economic growth has been spectacular in Latin America, listed as 5.5% across Latin America as a whole, but:

But Peru's president, Alejandro Toledo, remains the least popular leader in Latin America, and President Carlos Mesa in Bolivia has been battered by public protests. Vicente Fox's administration in Mexico is lacking popular support for its initiatives, and in Brazil many among the legions of poor believe they have been abandoned by President Luiz Inácio Lula da Silva, who embraced policies of fiscal restraint despite his leftist credentials.

Chavez gains in popular support as he introduces a Leftist agenda. Conservatives get ousted, or face increasing popular discontent. U.S. Citizens and Business have less need of Government spending, either to promote economic performance, or maintain a Subsistence Income. American Conservatives, though, refuse to stop spending Our and Our children's' money. Latinos are in dire duress, averaging 40% Poverty, but Conservatives will not be moved from their resistance to Social welfare programs. When will Conservatives learn that Greed cannot be the prime motivation? lgl

Sunday, April 24, 2005

Tax Incentives

The NYTimes had an article on the Presidential Commission on Tax Reform. The Commission has determined there are too many Deductions and Exemptions in the current Tax Code. Surprise??? They criticize the fact there is no Trackback, to determine if Tax incentives actually impel the activity desired.

Tax incentives are a real Issue, though no one examines them in the context of Taxation. They introduced Tax 'unfairness' into the Code, as Tax incentives grant tax remissions to beneficiaries based upon their privileged placement or position, and not on account of their diligence, aptitude, or hard work. Incentives provide no benefit to Anyone who does not have a Tax to pay, or has already been forced to pay Taxes elsewhere ( this Group of almost 40% of all Taxpayers, actually are likely to pay a higher percentage rate of Taxation, than do the Tax incentive beneficiaries). The blizzard of Tax incentive fulfillment Paperwork often cancels the ability to benefit from the incentive, or even to utilize the opportunity. The greatest critique of Tax exemptions, Deductions, and Tax incentives remain artificially high rates of Taxation.

The Bush Privatization Plan for Social Security is a Case in Point. It will ensure Tax inequity is maintained, if measures are taken before Tax reform. The Later, though, could eliminate any need for SS system salvation. Tax Reform is the necessary component!!! lgl

Saturday, April 23, 2005


Snapshot for April 20, 2005. Economic Policy Institute
Price growth outpaces wages for the 11th consecutive month

Today's CPI report allows us to examine the progress of wage growth four years out from the recession that began in March of 2001. Since then, real hourly wages have gone up by 1% in total, an annual rate of 0.2%. Real weekly wages, which reflect the diminished hours of work over much of this period, were flat, down 0.2% over the four-year period.

Snapshot for April 21, 2005 .Economic Policy Institute
Productivity growth and profits far outpace compensation in current expansion

Over prior business cycles, profits (including interest income) have accounted for 23% of the growth in corporate-sector income, on average, with total compensation accounting for the remaining 77%. In the current business cycle, the distribution is almost reversed: profits have claimed nearly 70% of total growth in the corporate sector, while increases in compensation (from increased employment and higher hourly compensation) have received just over 30% of total income growth
Study of these Two Quotes leads to some disquiet, and not just totally for the plight of Labor. Real Weekly wages have not risen, but stagnated with a slight drop. Imports have increased by leaps and bounds over the same Period, an arena where Profits can be maintained with relatively few inputs of Labor. Other sources cite Consumers paying down their Credit Card debt, as well as non-mortgage Bank debt. These elements, taken together, suggest the American manufacturing sector has eroded more than Economists thought. It also hints that the Discouraged Labor force are much greater in Numbers than Government releases maintain.

The Total could possibly foretell a weak Summer season, with consequential reduction of the Summer Employment. Housing Start permits need to be closely watched; if they continue last month's trend, Construction will lose Employment generation. Most Economists like to claim the Oil Price increases are not hurting the Economy excessively, but this Author thinks We are only beginning to witness the havoc. lgl

Friday, April 22, 2005

The Energy Bill

The House continues the tradition of granting Tax breaks to Companies, who currently possess higher revenue volume than ever before, while the fiscal Deficit grows. It also identifies in one manner with the Bush Social Security Privatization Plan in that is not expected to aid or assist in curtailing Oil Consumption or Oil Price, just as Private Accounts are not expected to help Trust Fund solvency. Republicans in D.C. have reversed the Business format, stating 'Pay for what you want now by borrowing the Funds to purchase, and We may or may not give you the services desired in years to come!'

Oil Price is starting to impact economic performance, the Fed Mid-Atlantic Report nonwithstanding. Oil Price topped $55 pb, nonsense when the tight supply consists of reduced refining capacity; something which should suppress Crude prices. Speculation, especially Hedge Fund managers, have distorted natural Market-clearing forces. The House Energy bill exhibits the same style philosophy, where generation of Profits becomes the center of attention, rather than the provision of Product. It resembles a Firetruck watering a lawn to keep it from turning brown, as the House burns!

Republican adoption of Keynesian policy stands as the height of folly. The multiplex of Tax breaks boggles the imagination, it is doubtful that even the IRS could catalogue the exact number. The House Energy bill is over 4,000 pages; is this meant to be a coherent Energy policy? This Author has not even mentioned the fuel additive legal evasion of liability. It requires $2bn for research in how to drill in deeper water? lgl

Thursday, April 21, 2005


The U.S. military finally has established relatively good lines of communication in Iraq, though it is eating up Transport vehicles--250 per month for complete overhaul. Much the same can be said for Trade: We are handling the volume, but We have clogged lanes. Oil Production also suffers the same condition. The Transportation Sector endures structural overuse of Components, and it cannot last forever.

China and South Korea are both producing Supertankers which are 'State of the Art'. They, though, will not be enough. They will also have to sail through overdriven Sea lanes. Oil drilling, Oil processing, tank storage, and Refining capacity hold a wealth of Plant and Equipment which has not been properly maintained; the Refinery accidents in the South was only the Tip of the Iceberg. Nuclear Power Plant has been overused Worldwide, what with the increased alternate Fuel generation costs; Management is delaying the Maintenance Shutdown schedules. Overuse breeds Accidents, and We can afford none, and not solely in the arena of nuclear power. lgl

Wednesday, April 20, 2005

Sending a Message

We find Ourselves again with $53/barrel Oil. OPEC has been pumping at practical maximum with little spare capacity. China came in with a 9.5% growth rate for the First Quarter(estimate).

Oil Prices Rise As Gas Supply Declines
By THE ASSOCIATED PRESS Published: April 20, 2005
The Department of Energy said in its weekly petroleum supply report that the U.S. supply of crude oil fell last week by 1.8 million barrels to 318.9 million barrels, or 8 percent above year ago levels. Gasoline inventories declined by 1.5 million barrels to 211.6 million barrels, or 5 percent above year ago levels

Gasoline demand has averaged more than 9 million barrels a day over the past four weeks, roughly 1.2 percent above year ago levels.

This Author does not expect a real Oil or Gasoline Shortage, either here or elsewhere in the World in the Short-term. This is not the Problem! We need to rethink our Energy Policy. American Gasoline consumption increases in the face of rising prices, when the Economy underperforms in terms of Employment and Industrial growth. The Chinese economy cannot maintain the pace, but will absorb Oil until it slows. Any sign of economic performance from the EU and Japan will raise the demand for Oil. Russia continues to promise higher Oil supply, but is in a blizzard of bureaucratic and Criminal paperwork.

This Author does not believe in Government interference in the Market, though it must, when certain common behavioral practices must be broken. This Summer may find Us again desiring Gas Rationing, something unheard since WWII. The Author is not talking Coupons! The President may need to issue Orders to limit Consumer access to Gasoline and Oil. This not because of developing Shortage, but to limit Oil price increase dangerous to the Economy. The most sensible Order would forbid Retailers from selling more than Ten gallons of fuel at any one time, except for Commercial vehicles, and forbid any Sale of fuel to non-Commercial users between 10 pm and 6 am.

The Order would not hurt Retailers, would help the Hotel/Motel industry, and retard RV trekking. This Author estimates it could save one million barrels per day, open Spare capacity for pressured Refineries, and break an American practice of needless Joy-riding engaged in by almost All--including the Author. He will probably again be accused of Leftist leanings, but it might become necessary. lgl

Tuesday, April 19, 2005

Inflation--Greenspan's Move: It better be Right!
Producer Prices Up, Housing Starts Plunge
By REUTERS Published: April 19, 2005

But outside of food and energy costs, producer prices advanced a mild 0.1 percent for the second straight month.

Over the past 12 months, producer prices have risen a sharp 4.9 percent -- the biggest year-on-year gain since November -- as oil prices have pushed higher.

Economists make a terrible mistake by citing the elimination of volatile elements, it works for the Consumer Price Index, but not for the Producer Price Index. Producer Prices exhibit 'extreme stickiness' when encountering lower Costs, as Business seeks to increase Profits by transference of monies from Resource Costs without lowering their own Price structure. Producer Prices reduce only with general economic downturn of sustained duration. The later year on year Quote expresses the real Inflation in the Economy.

Speculators still keep the price of Oil high, hitting $52/barrel in London today, though Production of Oil is increasing everywhere with actual Consumption leveling if not declining. Food Costs will not reasonably decline either, as Agriculture and Transportation make up the two greatest Costs(both heavily based on Oil consumption) inside Food Production. The Consumer Price Index must eventually be forced up by the Producer Price Index.

The article has another worry:
Single-family starts slid 14.4 percent, the largest drop since January 1991 and starts on structures with five or more units fell 31.6 percent, the biggest drop since March 2000. . . .
Permits for future groundbreaking, an indicator of builder confidence, also fell more than expected but remained at a level economists said showed some fundamental strength

The more than 17% overall drop in Housing will not recover, no matter the prattle about bad weather(could account for maybe 8% of the drop), until the price of Oil drops; this states that low Interest rates will not generate greater Housing or overall economic activity. Bonds and Treasuries, on the other hand, will lose Price and Subscription without Fed increases in the Overnight rate.

Alan Greenspan should immediately indicate there will be a Rate increase soon. lgl

Monday, April 18, 2005

Blogging and Information

There have been instances of Employees being fired from their Jobs because of what they have posted on a personal Blog. Some of the Firings have been justified by providing Insider information or criticism of the Employer, but some have been imposition of personal lifestyle standards on Employees by their Employers. Blogging has relatively little protection under the law.

The problem revolves around the issue of Free Speech, but it becomes exceedingly difficult to assess, when it impinges upon the Rights or Property of others. This goes far beyond Blogging! Morgan Stanley put out a Report that Oil would rise in Price, starting a wave of Speculation--driving the price of Oil higher. This cost Consumers a vast pool of Money devoted to Energy instead of other Consumption or Savings.

The fact remains that Economic reports and releases affect the volatility of the Market in adverse ways. Investors would state this allows for informed Investment decisions. But does it? Most of these issuances reflect Authors' personal agenda, are designed to illicit desired Investor reaction, and never outline clear contradictory evidence. Economics easily lends itself to propaganda effort.

Blogging may incite such Scare tactics as well as partisan economic releases, but they may help defuse such policies as well. This Author advocates a laissez faire approach to Blogging, except where there is direct injury to Employers. lgl

Sunday, April 17, 2005

Slow Growth

Let Us Praise Slow Growers
Published: April 17, 2005

The Article basically states that the slow growth of Japan and the EU suppress both Interest rates and Inflationary pressures on Commodity pricing. It reflects the current thought of most Economists, but may take a greater depth of perception to understand the situation. Some relevant excerpts:

Two-way trade between the United States and European Union members was $41.1 billion in February, second only to Canada. Trade with Japan was $15 billion, compared with $19 billion for China.
Exports of goods and services fell from 11.2 percent of gross domestic product in 2000 to 10.3 percent in 2004.

Numbers do count, even if they are this Author's Guess-estimates. We have a Trade Deficit in excess of $60bn per month. American Harbor facilities would have to be expanded by at least Thirty percent to accommodate such an amount of additional Product. There is not only a lack of Harbor infrastructure, but lack of physical space for such Plant. Economic supply also brings some disbelief in creditability of Economic thought and Presidential position.

World Oil Suppliers probably have about 5-8m barrels per day accessible capacity in the Short-run. The EU growth rate is projected as 1.6% for the current Year, with Japan projected current growth rate is 0.8% per year. The EU would require a minimum of an additional 6m barrels/Day of Oil to equal the growth rate of the United States(projected at 3.6%). Japan would need almost 4m more barrels per Day to match the U. S. growth rate. The extra Oil would be exceedingly expensive(much better than $100/pb), if it could be produced.

Japan imports almost all commodity elements for its Production. Their Supply of advanced Product relies almost exclusively of value-added marginal Profits. Japan business could not stay in operation paying extreme Prices for Production resources. Welfare Costs in the EU would triple under the onslaught of Finished Product price increases. They, or Us either, cannot be looking for sudden growth increase in their Economies. A Bush administration reliance on higher Exports to the World to correct the Current Accounts Deficit and the Trade Deficit seems irrational, if not outright foolhardy; these imbalances will not be self-correcting by Market forces. lgl

Saturday, April 16, 2005

Civil War Onset

Sensitivity Analysis of the Empirical Literature on Civil War Onset
Håvard Hegre (Centre for the Study of Civil War, PRIO)
Nicholas Sambanis (Yale University)*
Paper presented to the 46th annual meeting of the
International Studies Association, Honolulu, HI, 1-5 March 2005
February 23, 2005

A good Study, at least from the viewpoint of rigor. It's real failing lies in the lack of specificity in the Studies which it analyzed. These Studies all utilized Correlation values which were not sufficiently defined. This Author is an old Class-warrior, who suggests Economic growth in itself holds little significance. He proposes civil war onset economically centers upon the development of a Middle Class, without which opposition to the current regime remains splintered and incoherent. Rebellion within this Middle Class develops from regime intransigence in sharing power, or in lack of remuneration for the specialty of their productive effort. A further extension would highlight the need for the Middle Class to have invested some significant element of the standing Military.

The strength of political institutions upon civil war onset depends upon the failure of these institutions to subscribe and support the economic interests of the Middle Class. The instability of the region seems overrated, except for development of accessory centers of power--religious, business, or Trade unionism. All Studies do little to clearly outline the real scope of foreign intervention for whatever ends. Almost all civil wars fail from loss of foreign support--directly financial, covertly or overtly foreign military supply, with implicit potential Sanctuary. lgl

Tax Survey

April 14, 2005
Tax Foundation Annual Survey of U.S. Attitudes on Tax and Wealth

An overwhelming 77 percent said the federal tax code "needs major changes" or "needs to be completely overhauled."

Surprisingly, those most willing to trade deductions away for simplicity are the same ones likely to benefit from deductions: 59 percent of married respondents, 59 percent of those over age 45, and an overwhelming 69 percent of those with incomes over $75,000 say they are willing to abandon some deductions for a simpler tax code.

No information provided as to the rigor of the Survey, but it provides important insights, if the Spread and Sample variations are significant. The overwhelming commitment of Taxpayers seems to be simplification of the Tax Code, with desire for greater Tax fairness. The animosity to the Estate Tax stands evident, though current Tax rules disqualify Most from any taxation. Taxpayers still favor a Flat Tax over a National Sales Tax or the current Income Tax system. The Young and lower Income levels resented the Social Security tax, reflecting the FICA tax having become the Income tax of the poorer Working Class.

An interesting element expresses resentment that 44 million Tax-Filers pay no actual tax, with expression there should exist some Minimum Tax, to stop tax evasion by special exemptions. There appeared to be no Questions asked about the perceived fairness of Business taxation under the current Tax system, an important series for any Tax survey. lgl

Friday, April 15, 2005

Health Care Outcomes

Angry Bear (both AB and Kash) has provided excellent economic data on the Health Care issue: (AB) (Kash) (AB)

Beginning around 1980, the rate of health care spending in the US accelerated, both in absolute terms and relative to other nations. (AB)

Americans spend nearly twice as much as people in other developed countries spend on health care. Our closest competitor for health care costs is Switzerland, which still spends just 60% of what the US spends, per capita. And yet all of these countries achieve better health outcomes: longer lives, fewer dead babies and children, and more quality of life for their elderly. (Kash)

demographic factors do not explain any of the US's bad health statistics. (The US's low level of publicly provided health care does explain about one-third of the US's low life expectancy, however.) The conclusion is that there is something idiosyncratic about the US health care system that results in poor outcomes despite its enormous costs. The average American simply receives unambiguously worse health care while paying twice as much as citizens of the rest of the developed world. (Kash)

The reduced U.S. life expectancy and poor outcomes may be mislaid at Health Care's door. The pertinent data may reside in levels of artificial additives used in American Food products compared to other nations, the rigor of Enforcement of Environmental Standards, and the variable use of communal Health standards(control of Animal populations, disposal of Garbage and Junk, and Personal hygiene). Consider the MWTB issue: the fuel additive is known to contaminate Water supplies, yet the major Political issue is waiver for the Manufacturers of the Product.

The Issue of Health Care Cost should really be examined from the basis of Diagnostic procedures and repetition of Treatments utilized. High-cost Diagnostics are routinely used(every Patient a common Recipient) where only symtom-diagnosed Patients receive such discovery procedures in other nations. Sheer consumption levels of Drugs per Patient may be much higher in the United States than other nations, as American Doctors feel Patients will not understand non-Drug medical treatment, even for nonsensical ills. Real data collection on the Issue need be made (thanks Kash and AB). lgl

Thursday, April 14, 2005

Korea v. China

Strategic Choices in Science and Technology
Korea in the Era of a Rising China
Somi Seong, Stephen W. Popper
Prepared for the Korea Institute of Science and Technology Evaluation and Planning

A very important Read for Those concerned with the introduction of China(you could include India) into the World economy. It actually requires a Second or Third Read for Those truly interested. Salient Points:

Korea’s list of potential threats from China is considerable:
the hollowing out of the manufacturing sector, job loss, and
loss of shares of the world market and the China market.

The number of scientists and engineers per 10,000
population in Korea is 2.5 times that of China, whereas the absolute
number of full-time equivalent scientists and engineers of China is
seven times that of Korea. China’s large and increasing number of
S&T personnel gives it an obvious advantage in human resources.
China currently ranks second in the world in number of R&D personnel.
It has more doctoral degree holders than Japan, and the
number of Chinese who have completed higher education in the
S&T field is close to that of the United States. China’s full-time
equivalent R&D personnel was over 1 million in 2002, second only
to that of the United States and roughly six times that of Korea.

By the end of 2002, the number of employees in foreigninvested
enterprises (FIEs) had reached 23.5 million, accounting for
11 percent of China’s urban workforce. FIEs have conducted extensive
training of Chinese employees to enable them to use the advanced
technologies supplied by the FIEs and to operate within their
advanced management systems. In 2002, FIEs accounted for 33.4
percent of China’s industrial output, 52.2 percent of its total export,
and 21 percent of its tax revenue.

Students of Chinese History and Development find a consistency which will be a disappointment to foreign Investors, especially Western Corporate industries. The core of Chinese development suggests the traditional practice of integrating foreign innovations through replicative skill acquirement, then limitation of foreign access to internal Chinese markets. Smaller industrial Powers like Korea will find less threat from Chinese economic expansion as Chinese industry switches to internal market supply, though Korean Exports to China will decrease greatly.

This Author estimates China will maintain its Population policy to induce rapid reduction of Population over the next Century, coupled with pressured education of the Young, while suppressing actual Wages so as to keep Chinese production competitive with World production without opening its internal markets. Current Chinese leadership will not substantially alter its Currency policy either, as They intend for Foreign investment to finance the construction of Chinese industrial capacity. Who says old Communists are dumb? lgl


Two articles were posted yesterday,
The Dream Deferred? By James Pinkerton 04/12/2005
April 13, 2005
Al Qaeda Remains Trapped in a Vietnam Fantasy
By Austin Bay

The first Article suggested any attempt to clean up the two primary subsidized Mortgage Corporations, Fannie Mae and Freddie Mac(their full designation to hard to remember or type), was some break with Our ancestors and a defeat of the American Dream. The first is nonsense: Thomas Jefferson did not plan for Everyone to carry a Thirty-Year mortgage, or did FDR plan on 20% of this Country being mortgaged to the hilt(though Richard Nixon may have wanted the Cash Cow).

Truth: The heavy mortgage burden placed on Households eat up an incredible percentage of their Disposable Income, possibly matching Personal Income tax in burden, when drawing in assurance Insurance and higher Property taxation. Floated mortgages, not based upon sound Households assets, always require too great a devotion of Household Income towards mortgage payment--Housing makes a very poor Investment opportunity. The poorly-constructed mortgage lending creates an artificial Real Estate bubble, requiring all Purchasers to pay higher asking Prices of anywhere from 5 to 70% greater. It has more to do with the destruction of the American Dream, than it has with its construction.

Austin Bay, in the second Article, suggests that the Guerilla movement in Iraq is in the process of being broken. It is a most foolish sentiment! The Military continue to state they are destroying the Terrorist network, but it is not validated by ground data. They cannot attest that Terrorist Incidents are actually decreasing, or can attest they can cut such Incidents within the next decade. They actually possess no certitude that such Incidents will not multiply by a factor many times higher than One. This stands as highly relevant, as each new Incident creates further Casualties and loss of Property. Vietnam was different, but not as different as We would desire: We have a dedicated Enemy, one who will be able to submerge into the Native population for a great time to come, and one who can create Incidents daily and weekly. Casualties mount while Countermeasures cannot forestall the violence of the Enemy. We suffer attrition of Troop levels and Military equipment We can ill-afford to lose, without correspondent betterment of the Military and Political condition. It is time for an Exit Strategy. lgl

Wednesday, April 13, 2005

Global Growth

The International Monetary Fund projects that the World economy will grow at 4.3% this Year, with 4.4% next Year. It also projects a 3.6% growth rate for the U.S. economy, with a Chinese growth rate equaling over 25% for the Years 2004-06. This is vastly over-optimistic as considered by this Author.

China has suffered vast financial damage through Corruption and malfunction of their Banking system, leaving them structurally unfit to finance major economic construction within the next Two Years. The IMF cites their Projection as dependent upon Oil selling on average around $46.50 a barrel this year and $43.75 in 2006. (Source: . The IMF states the most likely factors affecting the growth rate will be Oil price and Federal Interest rates in the United States.
Rising Steel Prices Force Changes in Construction Plans
By SUSAN DIESENHOUSE Published: April 13, 2005

This article suggests a far different picture:

In construction, steel is pervasive. It is in structural frames, floor decks, ceiling grids, air-handling systems, wiring, plumbing, interior studs and bars that reinforce concrete. Last November, an index reflecting the cost of a theoretical market basket of steel products peaked at 412.6, according to the Producer Price Index compiled by the United States Bureau of Labor Statistics. Prices then turned down and by January, the most recent month for which the index is available, they had eased off to 330.7, but this is still double the level of 165 in mid-2003.

All Construction materials have increased rapidly in Price, shoving Construction prices upward throughout the World--by an approximate total average Price rise of 15-20%. The hardest impacted areas of Construction is industrial Plant construction. China will not be able to finance new Construction, even by older Estimates which have since inflated drastically. Their inability to finance has worsened by another factor:
Retail Sales Rose Just 0.3% in March as Fuel Costs Climb
By JENNIFER BAYOT Published: April 13, 2005

Excluding both categories - auto sales and gas spending - retail sales fell 0.1 percent, the first such decline since April 2004. The numbers represent an unexpected weakening in consumer spending, which for years has seemed indefatigable and today amounts to 70 percent of the American economy.

This Author's own Estimate:

The American Consumer Spending decline impacts China as greatly as the United States, with declining Retails Sales in the American market sharply constricting Chinese ability to finance economic growth. Total economic growth for China over Year 2004-06 will not make 15%. The Oil pricing is starting to impact American market, while Construction will downsize due to rising Interest rates and Budget-busting Materials Costs. The United States is unlikely to do better than the EU, unless American production starts to produce for the American market. lgl

Tuesday, April 12, 2005

Where have all the Flowers gone?

Trade Deficit Reaches All-Time High in February
By THE ASSOCIATED PRESS Published: April 12, 2005

Falling Fortunes of Wage Earners
By STEVEN GREENHOUSE Published: April 12, 2005

The two Articles interconnect, though Most may not recognize the Trade Deficit as the primary cause of the declining Real Wages discussed in the second article.

The Commerce Department said Tuesday that the February imbalance was up 4.3 percent from a $58.5 billion trade gap in January as a small $50 million rise in U.S. exports of goods and services was swamped by a $2.58 billion increase in imports.

For the first two months of this year, the trade deficit is running at an annual rate of $717.2 billion, a full $100 billion above the record imbalance of $617.1 billion set for all of 2004.
Imports of goods and services rose by 1.6 percent to an all-time high of $161.5 billion.

Exports were up by $50 million to a record $100.48 billion in February, reflecting increases in shipments of drilling and oilfield equipment, civilian aircraft and pharmaceutical products. These gains offset declines in sales of U.S.-made cars and auto parts and food.

The above Quotes tell Us that American Consumers are replacing standardized, non-technological American-produced Products with foreign-produced Goods. Why? Because American engineering expertise will not review and revamp the technological construct of standardized Products. This review and reconstruction does not provide the high Profits and Production gains of cutting-edge technology. They miss the Boat! The mass Consumption of the standardized Products produce actual higher Profits over the long-run, and American production could easily undersell foreign production--it saddled with Transportation and Distribution Costs from which American production can escape.

The problem is not with the jobs themselves. Most economists dismiss as overblown the widespread fear that the number of jobs will shrink in the United States because of foreign competition from China, India and other developing nations. But at the same time many of these economists argue that the increasing exposure of the American economy to globalization, along with other forces - including soaring health insurance costs that leave less money for raises - is putting pressure on wages that could leave millions of workers worse off.

This Quote from the second article outline where Economists miss the Boat! The number of Jobs will shrink in the U.S. because of foreign competition, unless American engineering expertise reinvents American production methods--including sectors of standardized nontech Goods production. Economists ignore the primary suppression of American Wages, which remains escalating Resource Costs due to massively-expanded foreign production; it expanded to produce for the American market. American Consumers are paying foreign Workers to take away their Jobs, when they purchase foreign Goods. This does not call for Protectionist measures, but redirection of American technology. The transformation of the Trade Deficit into Trade Surplus would bring vast Profit return to this redirection.

many economists, liberal and conservative, are perplexed by two unusual trends. Wage growth has trailed far behind productivity growth over the last four years, and the share of national income going to employee compensation is low by historic standards.

Why? Because American production is producing Toys for the World, instead of Necessities for Americans. lgl

Monday, April 11, 2005

When will the Deficit punch crunch? has an excellent Post on the 'Impact' time of current methodology of Government spending. Bad Budget policy will show up sooner, rather than later; ask Anyone who has ever cooked the Books in any Business. This Author predicts the economic climate will so alter in the immediate future, that the Bush Tax Cuts will not just run out in 2010, but will be repealed early. He also predicts that sacred Cows of Defense and Security will be pawed over extensively.

The Bush administration uses Accounting practice and procedures common to the Reagan administration, the greatest being that Deficits and Debt could climb forever. They systematically intone that the current Debt is not such a huge percentage of GDP, like the Federal Government was like some Teenager married couple who would eventually work themselves out of Debt. Economists, as least smart Ones, could explain it don't quite work that way!

The total Money Supply of the World reflects the total Net worth of the World(okay, some Economists would say World economy--a distinction few Readers will understand). This total Money Supply is not composed simply of Cash, or even Demand Deposits. It is the total construct of Savings and Liabilities existent. The key element here is that Cash(Demand Deposits same-same here) plus Savings must equal all Liabilities debt service--else Inflation enters the Equation. Inflation functionally remains nothing more than devaluation of assets, this due to their inability to produce sufficient Profits as to pay off their Liabilities.

The preceding paragraph may be important to Economists, but does little to explain the problem of the Federal Debt to Laypeople. The problem of the Federal Debt is not one of percentage of the GDP, but the fact they are Liabilities in the equation of the total Money Supply of the World economy. Dollar-denominated assets must produce sufficient Profits to equal Dollar-denominated Liabilities debt service, or there will a less-valuable Dollar which cannot buy as much as before. Another way of looking at it is: Dollar Liabilities debt service minus Dollar Profits equals Inflation.

Federal Politicians extol the great engine of American productivity, because they like to spend lots of Money they don't actually own: it belonging either to Taxpayers or Creditors. The problem comes from the fact that Dollar-denominated Productivity has hit a plateau, One not where Profits are not increasing as they are, but One where those Profits are not increasing as fast as Politicians like to spend. Just like the Tech 'Balloon' of the last Boom, Federal Spending will have to deflate. lgl

Sunday, April 10, 2005

Forms of Taxation

The Author once produced a book of that name( to be found at iUniverse), which shows his use of the same old dialogue. He had the miscreant thought, though, that he should express his beliefs on current Tax proposals:

Income Tax: A Flat Income Tax produces as much inequity as does excessively high percentage rates for Progressive taxation. The Author has proposed a Two-Rate form of Income Tax--15% and 25%. These rates of taxation would fully fund Government expenditures under certain conditions; complete elimination of reductive provisions except clear Business expense to produce the Income, the 25% Tax rate set where the additional 10% of taxation equals approximate same burden to both brackets, and all forms of Income(Personal Wages, Capital Gains, Rents, Royalties, etc.) are taxed equally as simple economic Income.

Sales Taxes: Most criticism of Sales taxation lies in their Regressive nature. This Author states the worst aspect of Sales taxation comes in the form of reduced Consumer Demand and Consumption. Sales taxes work well to raise State revenues, but fail drastically in funding of advanced Expenditure outlays. Sales taxes exceeding 22% have been modeled to cost a percentage point in Consumption reduction, for each percentage point increase in Sales tax rate. Federal Expenditures would require a Sales tax rate well in excess of 30%.

Value-Added Tax(VAT): Increases Production Costs at each stage of Production, and will decrease Consumption by a percentage point to percentage point basis, as the VAT rate increases Product price average above 31%. A VAT to pay the entirety of Federal Expenditures would increase Consumer Prices by almost 70%.

Capital (Property) Tax: Such taxation severely cuts long-term investment, as Taxation through the construction process destroys economic incentive. Property values adversely falls, as All seek to divest of non-Productive properties and investments.

Head Tax: The Author actually likes this Tax, but not for the reason Readers think. The Head Tax can be adjusted for the modern economy in a very efficient way: Taypayers could be made to pay $100 upfront for every $1000 received by any Means. Taxpayers could or could not file for a Rebate, citing listed Expenses above a certain amount for each total amount paid as Tax. The sheer existence of the Income assures Taxpayers of short-term credit to survive until Rebate. The Government is paid first, so Government expenses are offset by the interim Interest gained. Reduced Consumer Demand will retard Inflationary pressures, while actual Consumption reduction will be less than Any of the other forms of taxation discussed.

This Author marches to the beat of a different drum, but it is one you can dance to. lgl

Saturday, April 09, 2005

Market Orientation

Marginal Revolution
Tyler has a good take on 'spontaneous order' , but fails to mention the Time constraint placed upon it; where it will fold into the 'Invisible Hand' of a decayed Information market.
An AP article today suggested that Old-Economy industries were going to make a Comeback, having regained substantial Pricing power. This Author agrees with that assessment, but the Process will be far more than a quick shift of Investors into traditional industries. Real progress in older industries will come with reconstruction of Distribution and Service structures. Neither the Trade Deficit or the shaky Dollar will recover without recapture of the American Retail Market by American industry.

American industries possess the advantage of Position, current Exporters into the American Retail Market cannot maintain a efficient Service structure. Consumers currently "Buy and Toss" when the Product fails to function as it did 'straight from the Box'. Such tendency will not last as a weak Dollar and high Materials' Cost strain the Household Income. Imports fail the Test of Consumer Service. American industry will regain the American Market in exactly the same manner in which they built it. lgl

Friday, April 08, 2005


Brad DeLong's Semi-Daily Journal
Fair, Balanced, and Reality-Based
April 05, 2005
Keynesian Economics: Mail Call...

Marginal Revolution
Small steps toward a much better world

A very good discussion about fiscal policy from Brad DeLong, with general consensus from Tyler Cowan. The best element may have been Tyler's last line:

Mostly I am a skeptic about fiscal policy, if only because discretionary fiscal changes tend to be small relative to modern wealthy economies.

This Author disagrees with both assessments concerning Deficit spending, but is very close to their Thought on the matter. He has always doubted the value of Keynesian policy. He knows Government deficit spending is Inflationary--whose impact falls on the Resource markets, and very much identifies with putting a Mortgage on the business. Materials are left unpaid except for the issuance of Paper--very little difference between Dollars and Treasuries, similar to Cash purchases versus Credit card purchases.

Does Deficit spending fuel the Economy?

Very doubtful! It robs the Private Sector of investment funds, provides unproductive competition for Materials which is poorly funded (neither Wage return or Business profit), and guarantees future Tax revenues must be devoted to Government Debt service. An Argument can be made that the World would have recovered from the Great Depression faster without Keynesian policy. Later usage of Keynesian fiscal policy defied the initial logic under which it was proposed: An Economy must be producing at significantly less than Full Employment. Sector position near Full Employment of economic resources will place the Government in direct unfair competition with the Private Sector, as the Private Sector must finance such competition from their own Profits in later taxation. lgl

Thursday, April 07, 2005

Pension Funds

(Thanks to Steve Sass Associate Director for Research Center for Retirement Research at Boston College for the Pointer)

Managing public pension reserves
Part II: Lessons from five recent OECD initiatives
Robert Palacios
July 2002

A good overview Paper which outlines the benefits and hazards of various pre-funding schedules for Pension Funds. Several aspects should be defined by the Discussion before decisions should be debated. Primary stands the fact no one wants Benefits to be diminished by Benefit Cuts of any type(this includes Price-indexing Benefits), and Down-the-Road political pressure would likely eliminate any such Benefit-cutting scheme. The second element should be statement that current political leadership opposes raising the pre-funding taxation, but it could be the most potentially effective of all measures(recognize it is only viable with sharp alteration of Fund practice). So-called Investment pre-funding will only work if it is actual economic Investment, and not a slush fund to pay current Operating expenses for the Government.

This Author will restate his plan for Social Security reform:
1) Establish a Unitary (One-Rate) Benefit for all Recipient Retirees.
2) Deposit all FICA taxes into Federal Reserves accounts, which will pay all current liabilities, and invest excess monies with 4% loans to Individual banks--who can account such loans as increases in their Reserve requirements.
3) Establish a Delay system of Means-testing of Benefits, where Income earned by Retirees in their last Five years of contributions, if Above a certain defined limit, will delay the start of Benefits receipt; this will not affect the start of Medicare benefits.

The Unitary Benefit assures All will receive equal benefit from the program. The Federal Reserve accounts would assure the safest rate of Return on Investments to prefund Pension liabilities with the least need of supervision, and forestall political usage of the monies for current Government Operating expenses. The Delay system of Means-testing places Recipient loss closest to his Worker-earning Gain. The One-Rate monthly Benefit allows for efficient Wage-indexing of Benefits, and a valuable Tool to moderate economic performance through assigning exactly when future Benefits will be increased. lgl

Wednesday, April 06, 2005

Iraq--The Horror Show

American troops have been in Iraq for Two years now. The optimism of the Iraqi Elections are over now, and the Assembly has finally managed to form a Government. The American Death Toll is listed at 1498, with 12,180 total Casualties. It will not fail to be higher, regrettably, because the violent incidents continue. The Iraqi economy even shows some sign of recovery, where violent Terrorist action and violent American response does not destroy necessary Infrastructure. Is there going to be improvement?
IRAQ: Let's Make a Deal and Stage a Coup

First, there's the corruption. Iraq is a nation of merchants, where everything is for sale.

The Iraqi Sunni Arabs are still intent on regaining control of the country, and are now keen on doing it later, rather than sooner. The Sunni Arabs know they have an education and experience advantage over the more numerous Shia Arabs. They know that powerful Sunni Arab nations in the region, particularly Saudi Arabia, will back them in many ways. The fear of Islamic conservatism from Shia Iran can also be manipulated. With many experienced, loyal and capable Sunni Arab officers in the police and army, peace can be restored.

Read the entire short article. It remains more positive than this Author's view of current Iraqi affairs. It assumes Iraqi leadership wants a decline in the number of Terrorist incidents, something neither Sunni or Shia could accept. Terrorists sink into the Iraqi masses because all political, religious, and tribal leaderships will not oppose it. Why don't they oppose it?

The answer to the Riddle states they reflect the identical aspirations of PLO leadership. Their leadership of Iraqi society would be undermined, if Western political and economic reform was recognized by the Iraqi masses as effective. They draw Cash revenues from both their followers and outside Arab countries, all of which would disappear if Terrorist incidents were to diminish. American exit from Iraq under fire stands as a Commitment of the entire Arab world. Shia, Sunni, Kurd, or Baathist, Terrorist incidents will continue as long as American troops stand on Iraqi soil.

When will Bush and the Military develop an Exit strategy for Iraq? lgl

Tuesday, April 05, 2005

Conservative Use of the Budget Process

Reconnecting Tax and Budget Policies
by John S. Irons April 1, 2005

A very important Read for Those interested in how Conservative Republicans handle the Budgeting process. The most relative element was a Link:

Sticking Points in the Budget

The House of Representatives and the Senate passed different versions of the federal budget, which must now be reconciled and then passed by each chamber in order to go into effect. Here are some key differences and potential irresolvable issues.
Domestic Discretionary Spending: The House and Senate versions are $13 billion apart over the next 5 years, and $4 billion apart in 2006.

Medicaid: The House version includes up to $20 billion in cuts to Medicaid. The Senate, over the objections of most Republicans, passed by a small margin a bipartisan amendment to remove the cuts from the Senate’s version.
ANWR: The Senate’s budget contains a back-door provision allowing drilling in the Artic National Wildlife Reserve (ANWR). The House version does not contain this provision.
PayGo: Both the House and Senate versions contain unbalanced PayGo rules which require spending costs to be offset, but do not require costs due to tax changes to be offset. In the Senate, an amendment restoring balanced PayGo rules failed on a 50-50 vote. Last year, negotiations on PayGo helped to sink the budget.
Process: The Senate’s version also includes a new rule that requires 60 votes to approve any bill that increases entitlement spending by $5 billion or more over any 10-year period from 2015-2055.
Tax Cuts: The Senate version created reconciliation protection for $128 billion in revenue reduction over the next 5 years, while the House version protects $45 billion and includes $106 billion total.

A truly interesting element of current Budgeting efforts has become the Rank-and-File silence from Republicans. Grass-Roots Republicans will be as injured from current Budgeting practice as will Democrats, while None are within the 'privileged arena' of Tax Cuts benefits. One functionally has to possess an Income over $1 million per year to gain any Tax return which is a blip on the Scope. The Budget Cuts in Discretionary Spending will absolutely insist on Tax increases at the State level, due to mandated Federal liabilities placed on the States. The Bush Social Security Privatization Plan will rob normal Republican(who make on average higher FICA tax payments to the SS Fund) of more longterm Benefits from the Social Security system than Democrats. The majority of Republicans will actually be hit worse by the current Congressional agenda than Anyone else in the Country. lgl

Monday, April 04, 2005

Economic Causation

Economic Freedom and The
Environment for Economic Growth
James Gwartney Florida State University, Robert Lawson Capital University,
Randall Holcombe Florida State University

The Premise of the Paper attempts to portray that it is a systematic, mathematical correlation between economic freedom and growth. It makes the unstated assumption that only economic freedom could account for the economic growth found, alongside rather arbitrary choice of comparison Point intervals. It does not research other potential economic factors which may have affected the data throughout the extended Intervals. Examined from the propoundment of a Credo which they would imply as reality, it would deny the statistical possibility of Recessions and Booms, and dismiss such phenomena as current Chinese growth rates.

The Paper uses a Time interval which lacks a basis in reality other than personal choice to validate their assumptions. They do not even present an assessment of impact from other economic factors during the extended Interval. They also do not present rationale of why other more economically-repressive Regimes oft exhibit equally high rates of economic growth. They expound on the removal of Government strictures from economic performance, but do not discuss the impact of diseconomies associated with criminal or unethical investment plunging for immediate, temporary Profits which are engendered by totally unrestricted release.

The Author ran across this Paper because a Blogger
( tried to use this Paper to deny a premise of a NYTimes article
( which stated there is little evidence to prove that cutting Taxes actually encourages higher economic growth. All regretably suffer from lack of sound economic argument, though the NYTimes article was particularly accurate. lgl

The Medicare/Medicaid Bluebook

Continuous Readers here know the Author wants a major revamp of the Medicare/Medicaid program. He desires a yearly Maximum coverage couple with an immediate Co-Payment of $10 or $25 to the Health Care Provider. This goes far to limit the liability endured by Government and Taxpayer, but it impacts only Demand for Health Care. The problem of American Health Care will not be resolved with only Draconian measures to suppress Patient use of medical Procedures.

The Author proposes Congress mandate a Commission (appointed by themselves, or organized from the current Medicare administration. He suggests a fifty-fifty mix of Doctors and medical Economists)The Commission will be chartered to set the Price schedules for all Medical procedures and Products paid by both Medicare and Medicaid. The Congressional Charter will stipulate Medicare/Medicaid payments must cover the minimum cost of medical treatment by use of whatever Equipment, Drug, or Procedure possible to treat the ailment in question; but can be limited or exceed this minimal level at their discretion. Almost every medical complaint today has at least a dozen differing methods of Treatment--most variation of Drug type or Equipment utilized.

The Commission's responsibility will be to ascertain the cheapest effective potential course of treatment, which will be the amount which Medicare/Medicaid will pay. More expensive Drugs, Equipment, Procedures, and Health Care Providers will be used only if they are willing to accept the reduced rate of Payment. They will be told simply: Accept a more equitable rate of Pay, or lose your market. Congress, in the initial Charter, will have prohibited Health Care Providers from additional billing or Charges to the Insured Patients. Health Care Providers can either conform to the Pay rates, or serve the non-Insured market.

The Commission will yearly publish a Medicare/Medicaid Bluebook containing the complete list of medical treatment Pay schedules to Health Care Providers. Health Care Providers will have opportunity to appeal any Pay schedule to Congress or Commission, but all adjustments to the Pay schedules must be listed in future Bluebooks with the basic rationale for the said alteration. All Bluebooks will be available to the Public in Paperback form for $10, and must be offered for Sale in all Bookstores. lgl

Sunday, April 03, 2005

The Bush Privatization Plan

George W. Bush, and most of Washington--both Democrats and Republicans, want Privatization of Social Security before they tackle the more necessary Medicare/Medicaid reform. The Rationale behind this consists of a simple Theme, cut Social Security Benefits and lock them in, before explaining how they are going to gut the Medicare and Medicaid programs. No One can accurately define the total Tax revenues lost by the Bush Tax Cuts, but a close approximation would say 40% of Tax revenues were lost. Half of this Loss, or one-fifth of total previous Tax revenues, were remitted to the Top Twenty percent of Income-Earners.

The Bush Tax Cuts present a poor Return balance, with marginalized Growth in terms of total Tax revenues remitted. Current Leadership choses to reform(popular term for cutting Entitlements) Social Security and Medicare/Medicaid before Tax Reform, so the Laboring Classes cannot alter the loss of Entitlements without complete replacement of Washington Politicios, after Labor discovers the loss of Lifestyle and Standard of Living.

The Bush Private Accounts plan will, at the least extreme, cut projected Benefits by 60%, a nonrecoverable loss unless Private Accounts make a consistent 3% gain per year. Failure to maintain this gain level will mean loss of Benefits, while possibility of 4% annual gain (guaranteeing a One Percent profit for beneficiaries is actually slight(probably less than a 5% chance, when Inflation is factored in). Total Gain above Benefits of a real Profit for beneficiaries will never equal 10% of the monthly Benefit now guaranteed. Beneficiaries will bear all the risks of Privatization of the SS system, but will enjoy none of the real reward of Participation--absorbed by the Government to pay for Government expenditures which should have been paid by proper Tax rates. lgl

Saturday, April 02, 2005

Gas Usage

The NYTimes today had an article on Plug-in Hybrid Cars. It was a good piece, but did little to discuss the Issue in economic terms. A much better Piece, when all Comments are read, is:
More Gas for Washington, March 31, 2005
by Arnold Kling

Be sure to read all the Links provided. The real solution to the current high Gas prices remains reduction in Demand. Increase in Oil Supply will remain incremental until new technological development lowers Supply Costs. Plug-in Hybrids are only one source of Demand reduction. They cancel the functional use liability over distance which pure Electric cars suffer under. Another unpublished version (likely unworkable) would substitute a miniature Steam generator for a Car radiator; such a operation would raise the engineering efficiency of fuel use with actual weight loss for the Vehicle in question. The Author, himself, suggested Vehicle braking systems be turned into regeneration systems feeding a battery system, but that may have been suggested by Others prior to himself.

The Author sincerely believes it is time to consider Surface manufacture of usable Fuel. Why?

Refinery processes to alter Crude Oil to Gasoline consists of highly complex chemical alterations, which must be as tightly regulated as any Process utilized in any Chemicals production. The technology to produce plastic explosives has been with Us for decades. Plastic explosives when formed are liquid in form, until the Cooling process solidifies the compounds. Plastic explosives have already been made which will not explode from heat or fire, but require electricity to set off a reaction. Additives are known to forestall solidification under Cooling, which additionally will not retard the chemical reaction of the plastic explosive when set off. The Chemical process of manufacturing plastic explosives is not more relatively complex than Oil refinement into Gas, and only marginally more expensive in mass production units.

Production of plastic explosives need Petroleum products, but not in the quantities mandated to produce Gasoline. Actual plastic explosive production needs only about 20% as much Petroleum product to produce equal quantities of plastic explosive as Gasoline produced by the refining process. Plastic explosives require Carbon content, but such Carbon can be supplied from Waste Carbon product--Sewage, Garbage, Lawn cuttings, and Waste ground cover--Weeds, Brush, etc. The complexity would be in the collection of Waste Carbon, not in the manufacturing process.

The plastic fuel would be safer to handle and utilize than Gasoline; it would actually be safer to produce. Redesign of Motors would get computerized carburetion, while plastic explosives would produce greater Power with smaller quantities than Gasoline. Plastic explosives remain essentially compacted Carbon molecules--Superpacked--which produce high Power when the molecular chain is broken. A Concept goal of 300 mpg would not be unrealistic. The greatest value of plastic explosive substitution for Gasoline would be reduction of the Carbon pollution of the Earth. The Author estimates actual Cost could be brought under $70/pbarrel. lgl

Friday, April 01, 2005

Oil Prices

The Author has long assumed that the Oil Spike was generated solely by Speculators. The Goldman Sachs report only confirms it, with Hedge Funds driving up the latest Oil increase. He cannot get hard Stats(confirmed), but the Author estimates actual Oil production is increasing by 20-22 Thousand barrels per day, American Gas refining is about 4,000 barrels per day higher than in 2004, and China's Oil consumption is about 8,000 barrels per day below Peak last year--and not expected to increase this year. Confirmation of the actual usage would be appreciated by this Author.

The Job report from BLS directly reflects Oil Price constraint upon the American economy. The lowered UnEmployment rate of 5.2% is the serenity before the Storm--the Author estimates next month's rate will be 6.0%, if Oil Prices do not come down. Construction spending was only marginal in the face of new Housing Starts, highlighting Firms' distaste for the Fuel Cost of whole load purchases. Piece-meal purchase of Construction materials as needed, will raise the cost of Housing by an approximate 11% if unchecked. This All at a time when American Crude Oil stocks are at an all-time high.

Pump prices will drastically affect economic growth over the next two months because of the speculation Today, due to running through the Pipeline. The only Thing which will forestall the adverse effect is the unwarranted Speculation takes a bath within the next Ten days. The Author hopes the Speculators lose half the net worth, so as to stop this perversion of Market clearing. lgl